Abstract

References (33)

Citations (2)

Using the URL or DOI link below will
ensure access to this page indefinitely

Based on your IP address, your paper is being delivered by:

New York, USA

Processing request.

Illinois, USA

Processing request.

Brussels, Belgium

Processing request.

Seoul, Korea

Processing request.

California, USA

Processing request.

If you have any problems downloading this paper,please click on another Download Location above, or view our FAQFile name: SSRN-id274768. ; Size: 150K

You will receive a perfect bound, 8.5 x 11 inch, black and white printed copy of this PDF document with a glossy color cover. Currently shipping to U.S. addresses only. Your order will ship within 3 business days. For more details, view our FAQ.

Quantity:Total Price = $9.99 plus shipping (U.S. Only)

If you have any problems with this purchase, please contact us for assistance by email: Support@SSRN.com or by phone: 877-SSRNHelp (877 777 6435) in the United States, or +1 585 442 8170 outside of the United States. We are open Monday through Friday between the hours of 8:30AM and 6:00PM, United States Eastern.

Much of the theoretical literature on environmental instrument reflects a normative presumption that only "economic" instruments, such as effluent taxes or tradable quotas, can produce an efficient outcome. Other potential alternatives, such as non-tradable quotas or more general Pigovian taxes are ruled out as inherently inefficient. Moreover, most of the literature relies on an important but unwarranted presumption: that cost and benefit functions, although they may be subject to uncertainty, are identical regardless of the regime that is chosen; that is price and quota systems are assumed to face the same cost and benefit curves with the same expected values. More crucially, the models assume that no regime will be subject to greater or lesser uncertainty than another. Under these assumptions, environmental instrument choice is determined simply by the relative elasticities of the curves.

The real world is far more complicated than existing models of environmental instrument choice suggest. For one thing, monitoring and enforcement costs may be quite different for one regime than another. These cost differentials may affect not only comparisons between effluent tax and tradable permit schemes, but comparisons between "economic" instruments generally and more traditional regulatory instruments, such as technology-based standards or general Pigovian taxes. In some cases, for technological or institutional reasons, economic instruments will not efficiently or effectively attain exogenously set pollution-reduction goals.

This paper offers a broader framework for comparing environmental instruments. Whereas most theoretical models focus exclusively on the comparative compliance/abatement costs of alternative regulatory instruments, this paper incorporates administrative costs and residual pollution costs into what we term a "total-cost" approach. The implications of this approach for environmental policy are then discussed in the context of efforts to reduce greenhouse-gas emissions under the 1997 Kyoto Protocol. The paper concludes that the incorporation of administrative (monitoring and enforcement) costs and residual pollution costs into theoretical models can greatly enhance the utility of those models for environmental policy making.